Balancing commonality and differentiation within product platform strategy -: A process framework taking business context and strategy into account

Platform strategy is one of the effective methods to achieve cost reduction across product portfolio. However, if not appropriately managed, there are also risks concerning loss of differentiation. Therefore, appropriate balance of commonality (which is the reason for cost reduction) and differentiation is one of the most critical success factors in order to gain from platform strategy. Various practices from different disciplines are developed to show how commonality and differentiation should be balanced. In doing this, the approaches across disciplines vary concerning problem specification (what should be balanced concretely?) and solutions (how to balance commonality and differentiation within platform strategy?). Dependent on research aim and specified problem area, parameters and methods of research differ from each other across identified solutions to balance commonality and differentiation within platform strategy. Furthermore, the focus of current literature is to generate efficient scenarios for commonality and differentiation, but not on how to find out which of these efficient scenarios is the most appropriate for the company. In general, these approaches are developed theoretically and applied to cases in practice in order to determine benefits and limitations. To complement the theory of platform strategy, this research aims to identify a strategic process for balancing commonality and differentiation in order to find the right platform strategy among efficient scenarios by changing the direction of the research from practice to theory and analyzing how good practice companies, already applying platform strategy for many years, perceive the tradeoff between commonality and differentiation and how to find the solution in terms of appropriate balance between commonality and differentiation. The research will capture how good practice companies define their specific problem concerning balancing commonality and differentiation, taking into account the complexity of the real world and how it solves it, as well as the underlying reasons for their approach. From these results derived from good practice, a process framework should emerge and be developed to balance commonality and differentiation within platform strategy. Because of the complexity and necessary in-depth information level, qualitative research is applied to answer research questions. The qualitative study is two-fold: a) single case study of a good practice company already applying platform strategy successfully for many years in order to identify in-depth information about the processes behind balancing activities of commonality and differentiation within product platform strategy, and b) interviewing experts with experience in the field of product platform strategy across different business contexts to complement the perspective from single-case study by way of taking different business contexts into account. The results show that the relationship between cost and differentiation is varied especially considering the sub-dimensions of cost and differentiation which are relevant to different degrees from the company’s perspective. Furthermore, commonality within platform strategy impacts products’ cost and differentiation. Different kinds of commonality have different impacts on cost and differentiation level of products based on the platform. Commonality does not automatically mean a negative impact on differentiation, but it depends on the kind of commonality and components. If it comes to a tradeoff between commonality and differentiation, which is reasoned by the necessity of commonality of components with an impact on differentiation, the generic rule is to “maximize commonality to maximize cost reduction by ensuring sufficient differentiation”, also mentioned in platform strategy literature. So, good practice companies increase their commonality degree by ensuring sufficient differentiation. Sufficient differentiation means there is a certain tolerance to loss of internal differentiation (cannibalization) and external differentiation (competitiveness). In addition to that, results of the research show that commonality and differentiation decisions within platform strategy are made holistically, taking the strategy of the company into account. It means the target of cost reduction and ensuring sufficient differentiation is always a result of various strategies within the firm, whereby platform strategy is one of them. Therefore, the decisions with regard to platform strategy are always aligned with other company strategies. The emergent strategic process derived from good practice to balance commonality and differentiation within platform strategy consists of the following stages: preparation & plan-do-check cycle. In the preparation stage, there is a need to analyze the business context in order to define which sub-dimensions of cost and differentiation are relevant from the company’s perspective. Then, product positioning should be executed within a cost-differentiation matrix showing current and desired positioning. These steps assist in illustrating the gap that should be closed by platform strategy. After that, critical boundaries for internal and external differentiation should be defined in order to concretize “sufficient differentiation”. Then, component characteristics should be identified in terms of their relevance concerning cost and differentiation. In the planning/doing stage, according to the kind of components, different commonality steps should be executed. After each commonality step, impacts on cost and sufficient differentiation should be checked iteratively. If targets in terms of gaps can be closed by the commonality step, the process should be finished. Otherwise the next commonality step should be planned. If the last commonality step is achieved and there is still a gap in order to reach cost reductions targets, there is a need to refine the targets in the platforms strategy taking other strategies of the firm into account and the process begins again from the first step.